Building Customer Loyalty example essay topic

As the world economy expands, customers have more choices for where they get their products and services. Satisfying customers is no longer enough. Even satisfies customers have many options that can easily attract them away from their current supplier. Retaining customers requires building loyalty, which not only includes customer satisfaction, but also and emotional response that keeps customers coming back for more, which is customer loyalty. This paper will discuss what customer satisfaction and loyalty is, their differences, and how to create customer loyalty. The first thing to look at is the distinction between satisfied customers and loyal customers.

"When customers were asked in a survey about their previous supplier, 60 to 70 percent of them responded that they were "satisfied" or "very satisfied", yet they still switched suppliers" (Lenz, 2000, p. 1). Most businesses think their customers are satisfied, and they very well maybe. Unfortunately, customer satisfaction does not lead to customer loyalty. These days, even if customers are completely satisfied with the product or service, 40 percent of them will leave and start doing business with a competitor (Michaud, 2000). On the surface, 40 percent may not seem like that much, after all, over half of all satisfied customers are coming back. However, in dollars and cents, 40 percent is costing companies more than they may think, because attracting new customers can cost nearly double the amount it takes to attract repeat business from existing customer base (Michaud, 2000).

Cost associated with creating loyal customers are minimal compared to the cost of marketing and advertising to reach new customers. Loyal customers cost less to support, allow companies to take more profit, and are their greatest source of referral business. "Unhappy customers will tell ten people yet a happy, satisfied one will tell only five, the impact on the bottom line becomes very measurable, very real and very powerful" (Larsen, 1997, p. 1). So ultimately business want loyal customer, but the question of what are loyal customers still needs to be answered.

Customer loyalty describes the tendency of a customer to choose one business or product over another for a particular need. "In the packaged goods industry, customers may be described as being "brand loyal" because they tend to choose a certain brand of soap more often than others" (Novo, 2000, p. 1). Customer loyalty has become a catch-all term for the end result of many marketing approaches where customer data is used. Customer loyalty is the result of we-managed customer retention programs; customers who are targeted by a retention program demonstrate higher loyalty to a business. "All customer retention programs rely on communicating with customers, giving them encouragement to remain active and choosing to do business with a company" (Novo, 2000, p. 2).

There are several reason why companies wanting loyal customer with cost be the main one, but there several other ones. One being that loyal customers will spend more and in return profit margins will increase. Next is that they have a tendency to understand and appreciate value, and are less likely to price-shop (Lenz, 1999). Loyal customers mean repeat, long-term business, and they also serve as a fantastic marketing force, through word-of-mouth.

One other factor that loyal customers have is that the stick with a company through difficult times (Lenz, 1999). Now the question is how do companies get loyal customers. One way to get loyal customers is to understand their expectations. For most companies, understanding customer expectations is difficult to do.

Often companies think they know what their customer's expectations are, but they have never taken the time to really find out (Griffin, 2000). Customer's desires and needs change over time. What satisfied them in the past may no longer do so. Every company benefits from periodically evaluating what the customer currently expects and wants. While marketing studies provide a portion of this information, there is a need to dig deeper. "Not only do companies need to know what their customers want from their products and services, but they also need to know how customers want their products and services and what competitor and competitors are doing or talking about" (Griffin, 2000, p. 2).

Loyalty comes from not only satisfying customers, but also from building allegiance between the customer and the company. Allegiance is an emotional bond that develops from a relationship. Relationships, in turn, develop from the experience. Another way to create customer loyalty is to know what the customer actually experiences are. "Completing an analysis of customer experience from inside the organization looking out often results in wasting time and resources.

To create customer loyalty, and "outside-in" perspective is needed" (Griffin, 2000, p. 2). The view needs to be from the same point of view that the customer, not the company, has. Confirming customer expectations is a powerful tool for inspiring customer loyalty. The product or service the customer receives must meet or exceed their quality and future expectations (Griffin, 2000).

The interaction the customer has while obtaining and using that product or service must also build relationship. The net result of customer satisfaction plus allegiance leads to customer loyalty. "An outside-in evaluation of the customer experience is an important step to take to help understand what is working or not working in building customer loyalty" (Griffin, 2000, p. 2). A third way to create customer loyalty is by directing operations to exceed customer's expectations.

Once a company knows what customers expect and what their experience, customer profiles can be created. This allows business to make obvious decisions about the kinds of operation support companies need to provide in order to build loyalty. "These profiles pave the way for targeted customer loyalty surveys that provide companies with more in-depth information needed to align operations to be ahead of the shifting needs of customers. The author Laura Michaud created five keys to create customer loyalty as a company / employee. The first key that Michaud discussed is to establish a common ground. Customers relate to those people most like themselves.

They want to feel a connection with businesses beyond that of being just a client. Therefore, companies need to establish a common ground with each customer quickly. The second key to customer loyalty that Michaud states is listening and showing concern. Customers always want to talk about their most favorite topics, themselves and their situation, wants or needs (Michaud, 2000).

The more businesses talk about themselves, the more customers are turned away. In general, people do not take an active interest in a stranger's life. Therefore, stand out by building a relationship through talking about the other person and offering compliments when appropriate. Listening involves so much more than simply not talking. It is a matter of understanding a client, giving him or her full attention, and making them feel important. Once a company starts listening attentively, they need to let customers know that the care about their situation.

"They Can do this by asking open-ended questions, and by interjecting with "come-on" statement, such as "I see,"I understand,"Oh really", and so on" (Michaud, 2000, p. 2). By using these phrases and listening a company can build trust. The third key that Michaud uses is humor. She states, "one of the quickest ways to build rapport is through humor" (Michaud, 2000, p. 2). A good joke or funny story eases tension and breaks down mental barriers. It also shows customers a softer side.

Getting people to laugh forms and instant bond. The fact that both sides are able to let down their guard and laugh brings them closer together and lays the groundwork for a future relationship. The forth key is to keep a positive attitude. When a company is positive and upbeat, people naturally want to be around and do business with that company. Unfortunately, in today's world, seeds of negativity are all around, from traffic jams to 50 plus hours work weeks. How people choose to look at those situations, however, determines not only the employee / company mood, but also customer's mood.

The fifth and final key is treat customers like family. Customers want to know that a company has their best interests at heart. "The want to sense a "we are in this together" attitude" (Michaud, 2000, p. 3). Companies can easily accomplish this by being genuinely happy and excited to talk with them.

In conclusion, as service providers, it is crucial to remember that every contact made with a customer, be it face to face, locally, nationally, or globally, is a potential loyal customer. Customer service is neither a quaint notion nor a meaningless sentence in a corporate mission statement. As the marketplace Competition continues to intensify, customer loyalty is a matter for business survival.

Bibliography

Griffin, J. (2000).
Loyalty Path. [On-line]. Available: web (pp. 1-3). Larsen, A. (1997).
Customer Loyalty, Is There Really Such a Thing? [On-line]. Available: web (pp. 1-2). Lenz, V. (2000).
Customer Satisfaction is Not the Same as Customer Loyalty. [On-line]. Michaud, L. (2000).
Beyond Satisfaction: Five Keys to Creating True Customer Loyalty. [On-line]. Available: web (pp. 1-4). Novo, J. (2000).